Mis-sold Catalogue, Credit Cards & Store Cards

Introduction

Unaffordable lending practices with credit cards have been a persistent issue. Many lenders have been criticized for not adequately assessing their customers' financial situations, leading individuals to take on high-interest debt that they cannot realistically repay. This problem is exacerbated by the rising cost of living, pushing more people into financial hardship.

The Financial Ombudsman Service has reported a record number of complaints related to credit cards, highlighting the scale of the issue. This section explores the problems associated with credit card mis-selling, particularly focusing on unaffordable lending and credit limit increases, and provides guidance on how to make a complaint.

Unaffordable Lending

Credit card providers have a responsibility to lend responsibly, complying with regulations like the FCA's Consumer Duty rules. This means ensuring that credit card products are suitable for the customer's financial circumstances and that customers are not trapped in a cycle of debt. High interest rates, sometimes exceeding 39%, can make it extremely difficult for borrowers to repay their balances, leading to long-term financial difficulties.

Lenders who target individuals with poor credit histories are under increased scrutiny due to the high interest rates and the potential for rapid credit limit increases. While offering credit to those with a poor credit history isn't necessarily irresponsible in itself (especially with low initial credit limits), the subsequent increases in credit limits are where the problems often arise.

Credit Limit Increases

Initial credit limits offered to individuals with poor credit histories may be relatively low. However, it's the subsequent, often rapid, increases in these limits that can make the debt unaffordable. Lenders may increase limits without properly reassessing affordability, tempting borrowers to spend more than they can afford to repay. This practice can significantly worsen a borrower's financial situation.

The Financial Ombudsman Service has handled cases where they instructed lenders to provide redress due to irresponsible credit limit increases. In one example, a credit limit increase from a low amount to £3,000 was deemed unaffordable, and the lender was instructed to refund all interest and charges applied after the increase. This highlights the importance of responsible lending practices and the potential for redress when these practices are not followed.

Making a Complaint

If you believe you have been mis-sold a credit card or experienced irresponsible credit limit increases, you can make a complaint to your lender. Here are the steps to follow:

1. **Gather Evidence:** Collect all relevant documents, including your credit card agreement, statements, correspondence with the lender, and any evidence of your financial situation at the time of the credit limit increase.
2. **Contact the Lender:** Make a formal complaint to the lender, clearly outlining your concerns and the reasons why you believe the lending was irresponsible. Provide the evidence you have gathered.
3. **Internal Dispute Resolution:** Follow the lender's internal complaints procedure. Most financial institutions have a dedicated team to handle complaints.
4. **Financial Ombudsman Service (FOS):** If you are not satisfied with the lender's response, you can escalate your complaint to the Financial Ombudsman Service. The FOS is an independent body that can help resolve disputes between consumers and financial businesses.

Impact on Credit Rating

Making a complaint about your credit card does *not* directly affect your credit rating. The complaint itself is not recorded on your credit file. Only the lender you are complaining to (and other companies within the same financial group) will be aware of the complaint. However, if your complaint is successful, any negative marks on your credit record related to the mis-selling (e.g., missed payments due to unaffordable debt) will typically be removed, often after any outstanding balance is cleared.